Reko Diq speculation

While Barrick Mining put to rest speculation about its rumoured withdrawal from the Reko Diq project, the rumour itself arose because of weaknesses in the country’s systems. These are not sudden discoveries, but widely known, which is why, paradoxically, Barrick Gold has decided to stay the course. Perhaps the first lesson of the episode is that foreign investors contain inherent weaknesses, as they are, as in Barrick’s case, corporations, subject to the rigours and misadventures of corporate life. Barrick Mining is entering a restructuring which would lead to its becoming two entities, one dealing with North American projects and the other with Asia and Africa. It should be remembered that Barrick Gold is not the Reko Diq foreign investor. That is the Tethyan Copper Company, with a share of 50 percent each of the Canadian Barrick Gold and Argentina’s Famagusta. The shakeup in one of two corporations was enough to send seismic waves. What are the prospects with various Arab commercial entities which have not just expressed interest but have been promised shares by the Special Investment Facilitation Council. It should not be forgotten that such reports have an effect on stock prices, and Pakistan needs to consider whether it wants to be part of such speculation.

Another aspect deserves looking at. The reason why divestment was to be sought was that all projects in countries with weak adjudication systems were to be disposed of. Reko Diq has had a tortuous legal history, with a Supreme Court decision leading to an Award of $6 billion against Pakistan by the International Centre for Settlement of Investment Disputes, with a final settlement. Barrick has already reached a settlement with Mali, agreeing to pay $430 million, so as to return to a project expected to produce 670.000 ounces of gold, worth about $1.5 billion, next year alone.

The Reko Diq deposit is expected to yield 41.5 million ounces of gold over the next 40 years, apart from 5.9 billion tonnes of copper ore. Naturally, it is generating much interest, but it also shows the need for the country to refurbish its justice system so as to provide foreign investors a robust dispute resolution mechanism. This particular weakness has also been noticed by the IMF in its recent Diagnostic Assessment Report of corruption in Pakistan. A strong dispute is needed not just to attract foreign investment, but to benefit both local businesses and private citizens.